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For two months the market has been in a trading range. Two attempted breakouts to the upside have failed and one attempted breakdown this past week also failed. After bouncing straight back up for three days we are now back in the middle of the range and approaching resistance as we near the 50-day simple moving average of the S&P 500 at 1175.

There is nothing unusual about a trading range, but what has been challenging for many market players is the severity of the swings within the trading range. We have very strong multiple day runs, like we have seen over the past three days, and then even quicker reversals when we are hit with a negative headline. Both bulls and bears who start to think the market character is finally changing and embrace the momentum are constantly finding themselves trapped when it suddenly reverses again.

There are a number of reasons for this very choppy action. First is that we are highly sensitive to macroeconomic news. The debt crisis in Europe and the growing realization that the U.S. is close to falling back into a recession has us cycling back and forth as gloom and doom battle with hope for solutions.

The uncertainty of the global situation has helped keep market players out of position. One day the world is coming to an end and the next day we are saved, which results in constant scrambling to reposition. The focus is almost entirely on the headlines and there is little focus on individual stock picking, which tends to create greater stability.

After the breakdown this past Friday and Monday, market players weren't positioned well for strength. When we had the giant reversal Monday, few were ready for it and the bears had to rush to cover while the bulls had to find some buys. That kept the bounce going and brings us to this morning.

Another factor is computerized and high-frequency trading. The computers tend to accentuate the sharp swings as they exploit momentum. As I discussed Thursday, the computers are often programmed to create squeezes at natural shorting points or to create further downside at areas that normally would be considered support. The market already has a tendency toward choppiness and the computerized trading helps to augment it.

That is the setup for the monthly jobs report this morning. The natural inclination of many traders would be to short the news, especially since we have already had a big bounce, but as I've discussed this is exactly the point where the computerized trading programs often look to create further squeezes as they catch the bears out of position.

One very important thing to keep in mind is that once these trading-range bounces fail, we tend to rollover very fast. Each one of the recent bounces has been followed by at least two successive days of strong selling pressure.

If the trading-range pattern continues, we may have more upside coming -- but then there's the danger of another quick rollover. The jobs data will be the initial catalyst, but I'm expecting to see the market bounce around following the news before deciding on an overall direction.